Tennessee regulators have taken a hard line against prediction market platforms operating in the state. Cease and desist letters, shared on X by sports betting attorney Daniel Wallach, show the Tennessee Sports Wagering Council accusing Kalshi, Polymarket, and Crypto.com of illegal activity. The officials said the platforms offered sports wagering without holding state licenses.
Rather than focusing on product labels, regulators examined how the contracts work. They concluded that users place bets on sports outcomes. Tennessee law limits sports wagering to approved sportsbooks, so offering similar products outside that framework violates the Tennessee Sports Gaming Act.
Federal oversight claims rejected
The council dismissed arguments that federal law governs these contracts. State officials said federal commodities regulation does not eliminate state power over sports betting. Kalshi has argued in other disputes that the Commodity Futures Trading Commission (CFTC) has exclusive oversight, but Tennessee regulators explicitly rejected that position.
None of the three platforms hold a valid Tennessee wagering license. Regulators said continued operations pose a direct legal breach. Beyond licensing, consumer protection drove the action. The letters cited missing age restrictions, responsible gaming safeguards, and anti-money laundering controls. Officials warned such gaps increase user risk.
Refunds required, fines looming
Under the order, the companies must stop offering sports-related contracts to Tennessee residents immediately and void all existing contracts. Crucially, the council ordered full refunds of all deposited funds, with a deadline of January 31, 2026. Failure to comply may result in fines of up to $25,000 per violation, plus potential injunctions and criminal referrals.
Crypto.com's North American Derivatives Exchange received specific scrutiny. Officials said its listed contracts closely resemble traditional sports bets. Cointelegraph contacted all three platforms for comment; none responded before publication.
State vs. prediction market tension grows
Tennessee's move follows similar pressure in other states. A federal judge recently paused enforcement of a Connecticut cease and desist order, allowing a review of jurisdictional claims. Despite that pause, Tennessee officials signaled no retreat. They stressed state law governs gambling activity offered to residents.
The action highlights rising friction between states and prediction markets. Regulators appear determined to protect existing sports betting frameworks. Platforms may face increasing pressure to obtain licenses or exit regulated states. Tennessee's enforcement sets a significant precedent for the industry.